Kuwait Power Report Q2 2012

BMI View: Nuclear energy seems to have dropped out of contention for Kuwait, so in the near- to medium-term the country will be dependent almost exclusively on oil and gas. Much of the planned new generating capacity is gas-fired, with oil often used as a back-up fuel. The aim is to make more of the country’s oil available for export, even if this leads to a growing reliance on imported gas. Hints at a major renewables programme have yet to convince industry insiders. Low power costs mean that project economics are unlikely to attract foreign investors, so Kuwait looks set to go it alone in meeting growing power demand.

Following the Fukushima tragedy in 2011, Kuwait has ordered the National Nuclear Energy Committee to be dissolved and has now officially announced that it will abandon the pursuit of civil nuclear power.

Conventional thermal sources are, therefore, expected to remain the dominant fuel for electricity generation in the coming years, with many power projects that are currently planned or under construction due to use gas in order to reduce domestic oil consumption and free up additional barrels for export. The electricity and water ministry wishes to more than double generating and desalination capacity by 2017. An estimated US$2.5bn is expected to be invested over the medium-term to cater for the projected power demand until 2015. Renewables could become part of the solution, particularly given the vast solar potential of the desert state.

Key trends and recent developments in the Kuwaiti electricity market include: ?? Kuwait aims to generate 10% of its electricity from sustainable sources by 2020, according to Eyad Ali al-Falah, assistant undersecretary for technical services at the Ministry of Electricity and Water. To meet its clean energy target, which exceeds the 7% goal set by Abu Dhabi, Kuwait next must gather data on hours of sunshine and wind speeds, al-Falah said.

?? Over 2012-2021, Kuwait’s power generation is expected to increase by an annual average of 4.12%, reaching 78.83TWh. Driving this growth is an annual 5.72% gain in gas-fired and a 3.32% rise in oil-fired generation.

?? Following an assumed 6.1% increase in 2011 real GDP, BMI forecasts average annual growth of 3.81% between 2012 and 2021. The population is expected to rise from the current level of 2.82mn to 3.45mn by 2021, and net power consumption looks set to increase from 46.1TWh to 69.7TWh by 2021. During the period 2012-2021, the average annual growth rate for electricity demand is forecast at 4.24%.

?? Thanks partly to the forecast rise in net generation, the growth of which barely matches the underlying demand trend, Kuwait could end up with a small, longer-term power supply shortfall. A gradual decline in the percentage of transmission and distribution (T&D) losses from around 12.4% in 2011 should help balance the market. The theoretical net import requirement by 2021 is put at 0.15TWh.